Revaluations Loom Across the State

By:  John Garippa, as published in Real Estate New Jersey, October 2001

A new law in New Jersey could force hundreds of thousands of noted property owners to pay much higher property taxes. The new law allows a municipal tax assessor to reassess any property within the taxing jurisdiction that he/she believes is underassessed. This is a major change in property tax law.

A bedrock principle of property tax law in New Jersey has always been uniformity. While property taxes are a heavy burden in this state, the palliative has always been that the burden is uniformly distributed across the entire tax base. This happened because our state constitution mandated that taxation take place under standards of uniformity. The New Jersey Constitution requires assessment of "all property... according to the same standard of value."

Historically, taxing jurisdictions undertook revaluations with a heavy responsibility. They understood that all of the line items in the tax base had to be assessed on a uniform basis. It made no difference as to the size of the property in the tax base or which properties were successful and which were failures.

Once revaluation took place, everything in the tax base was under review. The reason for this longstanding standard of review was clear: Real property advances at uneven rates. Sometimes commercial property value rises at double-digit rates, while residential property remains stable.

The more likely scenario is residential property advancing at double-digit rates while commercial and industrial property move ahead more slowly. Under a properly completed revaluation, where all line items are reviewed simultaneously, these disparities in growth patterns should be discerned. At the end of the day, the tax rate should be evenly distributed across the board for all types of property, based on market value.

Under the new law, an assessor can make a determination that certain properties aren't being valued at prevailing market values. Only the most successfully managed properties, located in premier areas of the taxing jurisdiction, will then be targeted for revaluation.

Consider this: There are 10,000 line items in a jurisdiction. The last revaluation, which revalued all the line items, was five years ago. In that same jurisdiction, there is a waterfront area that has been successfully developed. The properties in that area have seen increases of 50% during that period, while the balance of the tax base has increased on average 25%. It would be possible under the new law to revalue just those properties in this waterfront area, imposing a much greater tax burden on them.

While proponents of the statute argue that there are safeguards to prohibit unfair practices, those of us who "labor in the vineyards" know that the reality will be quite different. In defending a revaluation promulgated against the waterfront client, one would have to prove not only that the market value is improperly inflated, but also that there are entire sections of the jurisdiction that should have also been revalued. Obviously, the burden of proof is on the taxpayer. In order to prevail, the taxpayer takes on a costly and difficult burden.

Selecting some taxpayers for reassessment while leaving others untouched has been called "spot assessing." The New Jersey Supreme Court spoke out about this practice in Township of West Milford v. Van Decker. In that case, a small group of taxpayers were singled out for reassessment based on the fact that they had recently purchased their homes. The balance of the tax base remained undisturbed. The court said that this practice was arbitrary, intentional, discrimination and that it violated the New Jersey Constitution's uniformity clause. The court underscored the validity of the Van Decker complaint that comparable properties that hadn't been recently sold reflected the market value of an older time period and carried a much lower tax burden.

Perhaps the only solace for taxpayers facing this new law is that the New Jersey Supreme Court used strong language in addressing Van Decker. "No statute can overturn the New Jersey Constitution's guarantee to its citizens that real estate shall be assessed according to the same standard of value or deny a citizen equal protection under the fourteenth amendment. If there is a conflict

between the constitutional and statutory standards, this Court has held unequivocally that the constitutional guarantee of equality must prevail."

Hopefully, the New Jersey Supreme Court will have the last word.

John Garippa is the senior partner of the law firm qfGarippa, Lotz & Giannuario, with offices in Montclair, NJ and Philadelphia. He is also president of American Property Tax Counsel, the national affiliation (network) of property tax attorneys.